One of the beauties of the business model thinking is that we learn to see a business totally different if we really apply stringent thinking and dissect a business into its building blocks. And one of the most important concepts is that the value proposition is not the product. Why?

It’s not the product that creates value but the value proposition. The whole value architecture including the product, the revenue model and the team & values all have to deliver the value the value proposition is proposing.

Deadly business with a value proposition that customers and democracies need

A simple, a bit eccentric example illustrates this. Take manstopper ammunition that is for very good reasons banned by the Hague Convention in international warfare.

Manstopper ammunition does not sound like a lovable product and in terms of Alex canvas as a good value proposition?

Actually, manstopper ammunition is the offer and not the value proposition. A good, and even meaningful value proposition depends from your customers, the job-to-be-done and the benefit you create for your customers. Read the rest of this entry »

When I joined Microsoft in 1993 my decision to do so was stimulated by the picture I had from Bill Gates as a visionary leader. The company’s mission Bill Gates created at that time was “A computer on every desk and in every home”. It was an aspirational vision and motivating target for the scorecards. Would Microsoft be the same company today if the mission would never have existed and Bill Gates visions would have not influenced the product and research agenda in the way he did?

Most famous companies today are connected to visionaries: Apple with Steve Jobs, Amazon with Jeff Bezos, Facebook with Mark Zuckerberg and Tesla with Elon Musk. Does this prove that only visionary leaders create truly successful and innovative companies? How many visionary leaders have failed to create successful and innovative companies? This is much harder to answer than the first question. We only know about success stories, failures do not get the same publicity.

The passion for a visionary value proposition

All of the above named leaders are not only visionaries from a product or services point of view. They are passionate about a value proposition for their customers. Bill Gates core value proposition was productivity gains, Steve Jobs was design and function, Jeff Bezos is price and customer service, Mark Zuckerberg is social sharing and Elon Musk is sustainable clean energy. The products are a means to an end and deliver the value proposition.

Employees in organizations need to understand the value proposition a leader wants to create. Innovation, to realize a value proposition, can occur everywhere in an organisations business model. Truly innovative organisations constantly challenge the status quo and look for different and better ways of achieving the vision.

A true visionary leader is able to view the organisation as an outsider. A fresh perspective allows the leader to forget about the existing customers and look at the entire world as the future market. A good example is Elon Musk with his broader perspective and the creation of multiple companies all supporting his true vision in a very different way.

So you need to know what your customer will love? What excites them? What moves them? This of course allows you to begin the process of designing a business model that delivers to both the customer and the business. Traditional business motivations are usually a push approach. But is this the future? Guest post by James Streeton-Cook

Right now, let’s make something better than what’s out there, something really cool and we’ll beat the competition and make a mint.

Since you are reading this post then we can assume you know better.

Current business thinking it is all about what the customer needs. So let’s pull out the Henry Ford standard about ‘faster horses’ for that one. Enough of the push!

Power of Pull – It’s a Lean Thing

Lessons from Lean Business have taught us the power of pull systems. »The core idea of lean is to maximize customer value while minimizing waste.«

When creating something new, some new value, be that a business model; product or service; or even a new industry platform – value is pulled into arrangement (not pushed) by Attractors involved.

The same thing happens in nature and as far as I know is current thinking for the formation of the universe. So with a bit of imagination, pull will also be relevant in business model innovation. It is a non-linear thing and most of everything is made up of non-linear systems. A river flows down hill. Why?

The pull in a good value proposition: 3 Types of Attractor

There are 3 types of Attractors to look for in your discovery, insight and understanding of what will excites your customer.

Recently, I had an intensive discussion with David Siegel who just moved to Zurich. His big idea is business agility and he is so right since the missing part in business model innovation is the process moving from your current business model to a better future. He calls it business agility. We at fluidminds use Rethinking business and Entrepreneurial Design for the process.

Regardless what wording we use, what we need is a process that helps companies to develop innovative business models that customers, employees and the owners love.

Today, two processes exit in companies that could be used: the innovation process and the strategic planning process. The names of the processes suggest that they could be useful, however in reality the opposite is the case.

Why? They lack agility and experiments. Both processes have the hidden assumption that with more and better planning you can anticipate the future. Both are focused on existing products and markets. These tacit assumptions might be right for a world of sustaining innovations, in a world of more-of-the-same.

But, and that is a BIG BUT, not in a world which is radically changing. Business model innovations have a disruptive character and focus on the whole business model. There is a need for business model innovations in any industry due to the Internet, the demand for clean energy, globalization, and due to the rise of Asia.

Therefore, almost every firm needs a different approach to innovation and strategy.

The future is not about prediction but about shaping the future with agile experimentation on what works and what does not work

Regardless how much you plan, you will not predict the future because neither customers nor companies can anticipate what is possible. The only way to push for radical innovation is to accept the uncertainty and thereby accepting that with more traditional planning we can not predict the future. Read the rest of this entry »

’Our industry is unique and should not be compared with other industries!’ This is a common phrase I have heard countless times throughout my consulting career. But is it true?

Strangely enough the most successful companies become prosperous not by excluding comparisons, but by leveraging other industries success factors and applying them in a new context. Many other companies that innovated within the boundaries of their current industry logic often left the stage early. When looking at new business models it is often clear that they have not been developed from scratch. Many models that have changed an industry are merely refurbished versions of another model by another industry.

Business Model Innovation is about combining successful models from various industries as well as finding completely new ways of doing things.

Re-imagine your organisation with a different leader

When you design your future business model you need to find ways to overcome the current thinking patterns or dominant logic of your industry. Famous leaders are often responsible for defining a new way of thinking in their industry. How would Rupert Murdoch or Frank Lowry run your business? What new customer segments would Robin Hood develop in your organisation? How would Pierre Omidyar lead your not-for-profit organisation?

Google didn’t apply the business model from the software industry, yet their first product was nothing else than software packaged as a service. Airbnb.com didn’t use the business model of the hospitality industry, yet they offer hospitality services. Kickstarter.com didn’t use a banking or venture capital business model, yet they fund new endeavours all the time.

They all applied models from a different industry and combined them with a new approach that broke the dominant industry logic.

Understanding another industries business models is only the first step

Companies should always look beyond their traditional industry borders to learn. Could you learn from Nespresso’s direct sales model? Could you do the same and sacrificed some reach of your sales channels for a much more rich interaction with your customers?

Could you learn from Ikea and outsource some core activities to your customers? Could you learn from Gillette and their “razor and blade” model? Could you learn from the newspaper industry with their subscription model that makes customer pay you in advance before they get the product? Read the rest of this entry »

Business Model Innovation opens up the opportunity to not only transform the value proposition, value architecture or revenue model of an organisation, it is a chance to rethink your human value systems and build businesses that customers love, employees’ value and investors are excited about. Often, particularly in turbulent times, cultural innovation is an imperative for management.

Many books have been written about why organisations should have value systems defined and how you implement values in your core business. Still not all organisation have made this effort and those who did not always manage to live up to those set standards. Surprisingly, Alex’s business model canvas does not have values as a key building block of a business model either.

Effective organizations identify and develop a clear, concise and shared meaning of values or beliefs, priorities, and direction so that every employee understands and can contribute. Those values, once defined, impact every aspect of your organization and of the whole business model. The values must be an integral part of a description of any business model.

In my leadership career I have experienced what difference it can make if you have a leader that takes on the challenge to transform an organisation through values. When I started my work at Microsoft Australia the organisation was at first view a fairly successful subsidiary, achieving its revenue targets and outperforming other subsidiaries in some areas of the business. At a closer look the organisation had issues in areas like customer and partner satisfaction as well as employee retention. The most worrying factor was that departments were fighting each other over resources and a culture of back stabbing was quite common.

Cultural Innovation as a starting point for Business Model Transformation

Microsoft had already values defined that every employee should live up to and display. In reality many of those values were not more than letters on a web site. The company appointed a new Managing Director and with his appointment a cultural transformation journey began. He hired a Consulting firm that was specialized in building “Conscious Businesses” and our organisation transformed within 2 years in an amazingly positive way. Our leadership team, which I was part of, experienced a dramatic change in how we interacted with each other and how we connected our businesses in a much more meaningful and holistic way. Our customer satisfaction increased substantially and our employee health index (a measure of subjective employee satisfaction) became world leading within the company. Read the rest of this entry »

What is innovation?

Innovation is a strange beast. Most people say innovation is about new technology or bringing new things to the market. Some might think of better processes.

Schumpeter went further and defined it as “The introduction of new goods (…), new methods of production (…), the opening of new markets (…), the conquest of new sources of supply (…) and the carrying out of a new organization of any industry”. (Source: Innovation Zen)

Innovation is about being different

However, what most of the time is missing, is that innovation has something to do about being positively different from your competitors. When every body in your industry is bringing out new products like in the TV set industry or in the PC industry, then this is no innovation. It is just daily business. You have to do it to survive. It’s a rat race.

Innovation is about being different in a way customers love.

However, successful innovation is different. Successful innovation is about being different.

Innovation is….

Innovation is when you just offer one telephone handset when your competitor offers 118 devices. Innovation is when you update your one phone only once a year a bit and a major overhaul comes every second year while your competitors bring new devices to the market every months. Innovation is when you see your “telephone” not as a device but as an access gate to whole new world. That’s Apple vs. Nokia. By the way Apple spent only a ninth on R&D than Nokia Read the rest of this entry »

Framing the business model so it can be quickly but well understood by others is core. So, how do we do it? By Paul Hobcraft

You have come to end of a fairly long week. You have finally finished your Business Model Canvas. Finally you have a working hypothesis of something that is going to challenge some of the existing business models around. You should feel pleased; it took a lot of hard work to get to that point.

Laid out on one piece of paper is something that could have real business value yet although you can see where the dots connect, you begin to wonder if others will see the same compelling value, to invest in it, to back it, to simply support it and encourage you to continue.

Completing a business model and identifying its critical parts is only that first step, the hard part is getting it off the ‘drafting board’ and making it something tangible and potentially commercially viable for those around you to engage with.

What is the next step in executing this potential game changing business model

Each new business model needs a compelling story – a narrative..

We really need to learn how to craft a story, to tell the narrative around why your business model idea stands out and is worth other people’s time and consideration. This business model narrative along with your business model you are potentially better placed to test it, to talk about it, to validate it, to make it ‘sing for others’. You are out to get engagement and contributions everywhere, from everyone, as you tell the story, describe your potential new business model you gain from their reaction and improve your understanding of the real need for your idea. Read the rest of this entry »

Ever since we have the Internet everything is abundant. So many information at your fingertip, billions of webpages, millions of articles on Wikipedia, millions of articles at Amazon and other hundred of thousands of specialized ecommerce shops with even more articles. But is more choice always better?

Abundance of choice is today the norm. That is due to the Internet. A physical shop is always limited by its physical space. The Internet knows no limit.

When I started my research on business model innovation in 1997 we were pretty much alone in this field. Actually, we had no word to describe the profound changes in industry structures due to the emergence of the Internet at that time. The term business model innovation just popped up in 2000 as a pure academic accident. I just added innovation to business model, a term that emerge in the 1990s and I secured the URL business-model-innovation. Today, Google gives me 190.000.000 hits for the term business model innovation. So you have abundance of sources of information about business model innovation. However, can you use them all?

More choice the better: The value proposition of the first wave of Internet ventures

The first battle cry in e-commerce and on the web was that now people have more choice than ever. More choice, the better was the value proposition. There was no limitation any more. You find any product today on the web in thousands of variations.Sport Conrad, one of the largest online shops for skis in Europe, Read the rest of this entry »

Business Model Thinking is coming more and more mainstream. On Friday, I was at a workshop sponsored by the EU commission on Business Model Innovation and Policy Making. Here are my takeaways.

Business Model Innovation on the top of the agenda for policy makers

I’m very happy that the topic we started more than 15 years ago will be part of the future innovation policy of the EU. 15 years is a long time for me as a person, but as the business professor Christoph Zott is pointing out in science and policy making 15 years is a short time particularly when you want to introduce new units analysis to understand how firms outperform or create über-returns with (business model) innovation.

Policy making in need for innovation by xkcd

Business Model Innovators as outperformers

While we as entrepreneurs do not care much about measuring the impact of business model innovation on a societal level, the EU or the OECD, that also participated, want to measure each countries performance on business model innovation and then define policies to foster business model innovation on a governmental level.

Most papers presented at the workshop had a strong focus on the technocratic parts of a business model like Value Creation, Value Capture and Value Proposition but were missing the human side to business, the people who run a business, make the difference in innovation but are also the biggest impediments to change.

Pieter Perett and his team from the University of Applied Science Northwestern Switzerland, who organized the workshop, presented their findings that business model innovation make a strong impact on the long-term performance of firms. They use statistical data to identify business model innovators and they try to calculate if there is a über-return for these business model innovators.

Edward Giesen, Head of BMI at IBM, presented their study on business model innovation. They use a different method. Instead of measuring the impact of business model innovation from statistical data, they interview CEOs on the importance of business model innovation, and they see that companies that are consider themselves as business model innovators are outperforming traditional product or process innovators.

Christian Zott, who published one of the first works on business models in 2001 and is a strong advocate for business models, criticized from a scientist point of view the methods to measure the impact of business model innovation. His main point is that business models are often defined too broadly so it is difficult to understand where the real impact was in the business model.

I liked his criticism a lot from a scientist point of view and his focus on rigidity, however his proposal to focus only on the activities might be rigid but then the concept of business models looses its relevancy and its magic to see new boxes, entrepreneurs have never thought of as points of innovation like the revenue model, the value proposition or the Team & Value side of a business.

Where’s the beef?

Hans-Jörg Bullinger, former Head of the German Fraunhofer-Gesellschaft, criticized that the studies are interesting from a scientific point of view, however, they do not help to overcome our technology bias. His call for action was that we need better tools to design business models for entrepreneurs. Of course, I loved his objection, since this is exactly, what we do with the upcoming tool box for entrepreneurs. Read the rest of this entry »